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Secret Sales

Global Witness has been investigating how two major international mining companies – Glencore and ENRC – are linked to the controversial secret sales of prize mining assets in the Democratic Republic of Congo.

Between 2010 and 2012, the Congolese state sold off major mining concessions in secret and at prices steeply below market value, losing out on at least $1.36 billion in the process – equivalent to twice the country’s health and education budgets combined. Rather than the state collecting most of the profits from these deals, the bulk of the money instead went to a series of offshore companies. These companies are mostly registered in the British Virgin Islands and are linked to Dan Gertler, a businessman and friend of President Joseph Kabila.

The offshore companies sometimes paid under five per cent of market valuation for their mining rights, before striking immensely profitable deals with international companies. If the state had dealt directly with the international companies, Congo could have kept the profits for itself.

The scandal over these sales led the International Monetary Fund to halt its loan programme to Congo in December 2012 and helped spur nthe UK’s Serious Fraud Office to launch a criminal investigation of ENRC (the Eurasian Natural Resources Corporation) in April 2013.

The following month, the Africa Progress Panel, headed by former UN Secretary-General Kofi Annan, said that Congolese “state companies are systematically undervaluing assets”.

Global Witness believes the deals make little commercial sense for the Congolese state and has expressed concern that figures from the Congolese elite could be corruptly benefitting from the deals, possibly through involvement in offshore companies whose beneficial ownership is unknown. A global system allowing companies to keep shareholders secret helps make this possible.

Mr Gertler vigorously disputes this, saying that all the offshore companies in the Fleurette Group, his holding company, have solely members of his family as beneficiaries. His spokesman has also argued that he did not obtain assets at knock-down values. Glencore and ENRC also deny any wrongdoing. We have published official responses from Mr Gertler’s representatives and Glencore on our website.

This is too important a matter to let rest. The companies involved must explain the role they have played in these secretive and questionable deals and full light must be shone on the beneficiaries of the offshore companies and their transactions.

The core documents:

The two main publications by Global Witness on the “secret sales” scandal were our memos to shareholders of London-listed companies Glencore and ENRC. Both memos were published on the eve of the companies’ annual general meetings in 2012. They were followed by a series of shorter briefings.

We would recommend that those new to the issue start with the Q&As on the subjects. Click here for the Glencore Q&A and here for the ENRC Q&A.

Global Witness’s May 2014 report, ‘Glencore and the Gatekeeper’, traces the commodities giant’s entry to Congo and the evolution of its ties to Dan Gertler, the middleman at the centre of some of the nation’s most controversial mining deals. Click here to read it.